The Federal Direct Student Loan interest rates for the school year 2017-2018 have been determined. The student loan interest rate is 4.45 % for Undergraduate Direct loan program, which is an increase over the 3.81 % of last year. The Graduate Direct loan rate will be 6.00% and the Direct PLUS will be at 7.00%.
The federal student loans interest rates changes each year on July 1st. The rates are used for direct subsidized, direct unsubsidized and direct plus loans. The Federal Student loan interest rate is based on the May Treasury note auction each year plus the Department of Education add-on fees. These interest rates are fixed for the life of the loan based on the type of loan borrowed. The rate could change if the loans are consolidated at some time on the future but will be a factor in the consolidated interest rate. Federal Loan Consolidation does not use current interest rate but a weighted average.
This is an increase from last year, due to high interest rates. In this highly political environment, this increase is not due to a policy change but an increase due to market interest rates being higher.
There are processing fees associated with these loans and these fees will change depending on the type of loan the student or parent is using.
The following table provides the interest effective for new Direct Loans disbursed on or after July 1, 2017 and prior to June 30, 2018.
Here is the repayment amount based on a 10 year amortization repayment plan per $1,000 borrowed using the new federal loan rates. This does not include added fees or accumulated interest.
Direct Undergraduate @ 4.45% = $10.34 per $1,000
Direct Graduate @ 6.00 % = $11.10 per $1,000
Direct PLUS @ 7.00 % = $11.61 per $1,000
Planning for the Outcome
Before a family makes the decision to accumulate college debt, we feel that a family should understand their projected debt at graduation. Determining the debt structure early in the college process, will enable the family to plan and make better financial decisions. Lack of planning has contributed to the growth of the student debt crisis. Student loan debt is now over 1.4 trillion dollars. Start planning now so that you don’t accumulate unmanageable debt at graduation!
EFC PLUS has a new software called the In College Payer which helps students and parents plan for graduation and life after college education ends. It organizes the current debt, projects the future debt, calculates the loan repayment options and build a personal budget. By having this information, families can see the true net cost and future debt of getting a college education.